CongressNow Overview: High Prices Mean Bright Future for Renewables

Posted July 17, 2008 at 2:11pm

With gasoline prices expected to hover at record levels for the near future, Congress is once again looking to alternative sources of energy to ease supply woes.

While Democrats and Republicans continue to spar daily over the need for new drilling of oil and gas, the discord obscures the broad agreement among lawmakers from both parties that renewable energy sources — such as wind and solar — are crucial for addressing America’s future energy challenges.

“We all know that the future of America’s energy needs are renewables: the sun, the wind, geothermal,” Senate Majority Leader Harry Reid (D-Nev.) said earlier this month.

House Minority Leader John Boehner (R-Ohio) also called for support for renewables at an event touting the House GOP’s “all of the above” energy plan.

“We need to continue and probably increase the incentives for the development of alternative energy sources,” Boehner said. The Republican “use less, produce more” strategy calls for boosting domestic production and promoting renewables and other conservation measures.

The bipartisan consensus provides a legislative opening for policies to promote alternative energy — defined broadly as renewables, efficiency measures and new technologies — in the closing days of the 110th Congress.

One vehicle could be a bill under development by a bipartisan bloc of 10 Senators who are attempting to fashion a bipartisan compromise on legislation to reduce gas prices.

While success will hinge on the group’s ability to reach agreement on some of the thornier issues — such as oil drilling and addressing the speculation that some blame for the rise in energy prices — there’s plenty of room for agreement on renewables and such areas as plug-in hybrid technologies that allow vehicles to run on electricity.

“There’s so many things that are not controversial as it relates to energy,” said Sen. Bob Corker (R-Tenn.), a member of the group.

Senate Minority Leader Mitch McConnell (R-Ky.) agreed. “Most of our members are OK with almost all the conservation measures that have been suggested,” he said earlier this month.

One area likely to continue to receive attention before the end of the session is the extension of renewable tax incentives that are scheduled to expire at the end of the year.

The extensions boast broad bipartisan support in both the House and the Senate, but they have stalled over disagreement with offsets used to comply with pay-as-you-go rules.

Extension legislation was added to the Senate housing assistance bill earlier this year by a wide margin, but it was stripped from the bill in the House at the insistence of fiscally conservative Blue Dog Democrats, who objected to the lack of offsets.

Sen. John Ensign (R-Nev.) earlier this month held up a major housing bill in an effort to reinsert the extensions, this time paid for by across-the-board spending cuts over 10 years, but that gambit failed. He later said he would continue to press the extensions but added that uncertainty over the incentives is already hampering investment in wind and other renewables at a time when alternative energy sources are in demand.

“Harnessing the sun’s power, the wind’s energy and geothermal resources can help end our addiction to oil, but we need to act soon to ensure that these projects are built,” he said on July 10.

The next best opportunity for passing the extensions lies with the more general tax extenders legislation currently before the Senate. A bill authored by Senate Finance Chairman Max Baucus (D-Mont.) would extend the production tax credit for one year for wind facilities and three years for less mature sources such as biomass, geothermal and small-scale hydropower.

Baucus’ bill would also extend for eight years an investment tax credit for residential and commercial solar projects, and it would authorize $2 billion in new renewable energy bonds to help pay for facilities that generate power from a host of alternative sources.

But Senate Republicans have twice blocked efforts to move to the extenders bill, citing opposition to paying for the energy provisions and other tax extensions by ending hedge-fund managers’ use of offshore accounts to avoid paying taxes and to extending an existing delay in implementing interest allocation rules for multinational corporations.

Instead, McConnell has urged that the extensions be paid for by spending reductions. It’s unclear whether Democrats will be able to peel away enough Republicans the next time the Senate votes on cloture, but pressure is mounting on Republicans to agree to the Democratic-backed offsets.

“If these tax provisions are not extended, our country’s ability to innovate, compete, and help solve our energy needs through renewable fuels and energy efficiency will be compromised,” wrote the National Association of Manufacturers to every Member of Congress on July 10.

The appropriations process represents another avenue for lawmakers to address alternative energy. The energy and water appropriations bill approved by the Senate Appropriations Committee earlier this month would increase spending for efficiency and renewable programs under the Energy Department by more than $200 million over fiscal 2008 levels, while extending the department’s authority to provide $10 billion in federal loan guarantees for renewable energy projects.

The energy and water spending bill passed by the House Appropriations Committee in June also includes increases for efficiency and renewable programs and research.